Raab expects contractual obligations to be met

The Health Minister Matt Hancock provided further optimism about the pace at which the UK is proceeding with its vaccination programme when he appeared at the Government Covid update last evening.

The UK is so well advanced in its provision of the first jab that over 40’s will be invited to book their appointments in the coming days.

Meanwhile, the Foreign secretary Dominic Raab made comments designed to counter concerns that the EU may withhold doses of the Pfizer jab that should be destined for the UK, due to unwarranted concerns over the AstraZeneca vaccine.

The Bank of England’s MPC concludes its meeting later this morning and it is possible that they will follow the FOMC by taking on a watching brief.

While the FOMC decisions on inflation are far more pressing given the size of the fiscal stimulus that was recently approved and already being delivered, the MPC will have to deal with the release of pent-up demand that will most likely be released on 12thApril.

The most vital question that the MPC will face is, will the increase in activity and output that follows the lifting of restrictions on non-essential retail outlets and a partial lifting of similar restrictions on hospitality, be sustainable?

There is a concern that until the entire economy is functioning at something approaching full capacity again no one will really know what the effect on business of the Pandemic has been. It may be even longer, until support is completely withdrawn, until just how serious the continuing employment crisis may be.

It is quite possible therefore that there may be a significant uplift in economic activity in the short and possibly medium term that lulls Government into a false sense of security, which sees the fourth quarter of this year and the first of 2022 suffer growing core unemployment.

For now, the pound is profiting from the success of the vaccination programme and the feelgood factor it is generating. Yesterday, it reached a high of 1.3971 in reaction to the FOMC decision.

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Rising rates in ‘22 but for now no change in support

How easy is it to be wise after the event with the FOMC?

There was a slight hardening of FOMC members attitude to when rates quill rise, but overall, it was a complete steady as she goes meeting.

In December, there was just one member of the Committee who saw a rise in rates in 2022. At this meeting, that number had risen to four. The number seeing a rise in 2023 also increased.

While that betrays more concern about rising inflation, the overall outcome of the meeting remains one of concern that the recovery is not yet built upon a strong foundation. This means that along with fiscal stimulus, monetary support remains.

In his press conference following the meeting, Chairman Jerome Powell spoke of really strong data on the horizon. He believes there will be an uptick in inflation in the next couple of months but that may be a temporary phenomenon as pent-up demand drives the economy.

Powell is not concerned about rising debt levels either in the corporate sector or amongst households. He clearly believes that both sectors will benefit from the reopening of the economy.

The Conference ended with Powell commenting on continued monetary support for the economy. While agreeing that the next few months will see significant growth, it is not yet appropriate to begin talking about tapering QE.

The dollar index fell as the market accepted that support and stimulus are here to stay with rate rises hardly even on the agenda.

The index fell to a low of 91.37 late in the day. It closed within a whisker of the low.

The FOMC will have seen an advance cut of the weekly jobless claims data that will be released later today. While it is hard to read a significant change from what was said, it is fairly certain they will continue to move in the right direction.

Von der Leyen expects vaccination targets to be met

There is a significant degree of scepticism about both the motives of the EU Commission in voicing its concerns over the AstraZeneca vaccination and the fact that its President is willing to be both pessimistic and optimistic almost in the same breath.

One day, there is a concern that this brand can cause blood clots, and the next, she says that she expects 70% of adults in the EU to be vaccinated by the end of summer.

This would be patently impossible without using both of the most popular and easily attained vaccines.

As alluded to recently, globalization and the equalization of imports, exports, currency fluctuation and inflation mean that Central banks have been virtually pitched against each other.

Each wants to ensure that they are able to export at competitive prices whether that be goods or services, that they are able to increase production to a level where imports become less relevant and control the fluctuation of their currency in order that inflation remains within the boundaries set by national Governments.

So far, the U.S Treasury, which is in control of the currency has said it does not want a return of the strong dollar policy. The ECB has recently commented that since the dollar is the reserve currency the Treasury has an unfair advantage in its ability to control trade to a certain extent.

The pound remains fragile but retains the vaccination trump card that not even the U.S. can match and that will lead the pound higher, but not significantly so in the short term. That relative strength will allow the MPC to keep rates lower longer.

The euro suffers first and foremost from a lack of confidence, that is backed by the vaccine fiasco and the fact that the only tools left to the Central Bank, that of throwing more cash at the issue may not work given the rising debt issues that have, again, been deferred.

Today, the euro managed to rally as the market squared positions. It reached a high of 1.1985 ahead of the FOMC.